Broker Philstocks Financial Inc. said the benchmark Philippine Stock Exchange index (PSEi) may end the year within 7,150 to 7,750 points if corporate earnings will grow by double digits.
In its research, the broker said its corporate earnings per share (EPS) should grow by least 20 percent this year as its base case scenario and 30- percent increase as its best case scenario.
“With an EPS growth of 20 percent, we project the local bourse to close the year at 7,150.00. Meanwhile, if the 30 percent EPS growth is achieved, the local market is seen to finish the year at 7,750. For 2021, our market’s forward price-to-earnings ratio is estimated at 20.77 times,” it said.
The PSEi closed on Thursday at 6,991.01 points.
The broker said in both cases, it factored in easing of social restrictions which could help in the recovery of the economy in general.
“Easing of restrictions is also seen to allow more consumption which in turn would boost our companies’ revenues. Our expectation is also hinged on improving consumer and business confidence. Better consumer sentiment would lead to more spending which in turn would help our corporates’ toplines,” it said.
“Better adaptation to the new normal both by consumers and companies are also seen to help boost earnings. Risks against our projection include the resurgence of Covid-19 cases, return to stricter form of quarantine measures, and ultimately, a delay in economic recovery. The rising inflation is also seen as a risk as it diminishes the purchasing power of our consumers.”
It said the country’s inflation rate is expected to rise to 5.2 percent to 5.7 percent from 2.6 percent recorded last year, mainly driven by supply-side pressures on agricultural production.
Contributing to the rise is also the low base effect in the middle of last year, when the strictest lockdown in the country occurred and people spent less.
It projected the country’s economy as measured by GDP could grow by 5.8 percent to 6.3 percent by the end of the year, while the peso-dollar exchange to end within P48-P49 to $1.
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